• European bourses saw a choppy start to the session but have since been trending higher, with US futures are moving in tandem
• DXY declined under 113.00 as GBP strengthened; EUR and Antipodeans gain whilst USD/CNH tested 7.2000 to the upside
• US Treasuries are observing some caution whilst EU bonds trim yesterday's losses and Gilts outperform
• Fed's Bowman (voter) said sizeable rate hikes should remain on the table if they do not see signs that inflation is moving down 
• Chinese Health Official said China will continue to strengthen COVID prevention and control, will resolutely guard against large-scale outbreaks
• Looking ahead, highlights include US CPI, US DoE, Astana Summit, Speech from BoE's Mann, Supply from the US

13th October 2022

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EUROPEAN TRADE

EQUITIES

• European bourses saw a choppy start to the session but have since been trending higher despite a lack of fresh fundamental drivers.
• Sectors are now mostly firmer, although tech remains the laggard after TSMC cut its capex guidance and flagged a decline in overall chip industry next year.
• Stateside, futures have been moving in tandem with their European counterparts, whilst the tech-laden NQ lags vs its peers.
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FX

• DXY declined under 113.00 ahead of the US CPI metric, although likely as a function of GBP strength throughout the European morning.
• EUR benefits from the pullback in the Buck, with EUR/USD back above 0.9700.
• Antipodeans are also faring well alongside the improved risk tone across markets.
• USD/CNH tested 7.2000 to the upside, whilst China continues with its zero-COVID policy ahead of the CCP National Congress.
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Notable FX Expiries, NY Cut:

• EUR/USD: 0.9640-50 (1.22BN), 0.9735-55 (1.04BN)
• USD/JPY: 147.25 (1.9BN)
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FIXED INCOME

• US Treasuries are still observing some caution before potentially key CPI data, but EU bonds are flying just a day after diving to new cycle lows.
• UK debt is leading the mainstream recovery whilst there is chat in UK markets about another possible fiscal U-turn and/or the BoE relenting on buy-backs to offer further assistance beyond tomorrow, albeit all speculation at this stage.
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COMMODITIES

• WTI and Brent front-month futures are modestly firmer intraday but off best levels after settling lower yesterday.
• IEA Monthly Oil Market Report: lowers 2022 oil demand growth outlook by 60k BPD to 1.9mln BPD, 2023 cut by 470k BPD to 1.7mln BPD. World oil demand will contract by 340k BPD Y/Y in Q4.
• Spot gold gains traction as the Dollar declines ahead of US CPI, with the yellow metal back above its 21 DMA (1,672.50/oz).
• Base metals are firmer across the board amid the Dollar’s recent decline alongside the gains across stocks, with 3M copper back above USD 7,500/t, whilst LME aluminium outperforms
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NOTABLE EUROPEAN HEADLINES

• ECB's Wunsch said it is better to start QT sooner than later, via a pre-recorded CNBC interview.
• EDF Working Council said in the event of a normal or very cold winter, EDF will be forced to take some users off the electricity grid; capacities will not suffice.

NOTABLE US HEADLINES

• Fed's Bowman (voter) said sizeable rate hikes should remain on the table if they do not see signs that inflation is moving down and she fully supported Fed's 75bps hikes but also stated that a slower pace of rate hikes would be appropriate if inflation starts to decline. Bowman said it is not yet clear how high rates will need to go and inflation is much too high which they must bring down, as well as stated that the FFR will need to increase to a restrictive level and remain there for some time. Furthermore, she noted that significant uncertainty on the inflation outlook makes it challenging to provide precise guidance on the path of rates, while she added that the outlook for inflation and economic activity has significant two-sided risks, according to Reuters.

CRYPTO

• Bitcoin just about holds onto USD 19,000 whilst Ethereum hovers around USD 1,275.

GEOPOLITICS

RUSSIA-UKRAINE

• Sites in Ukraine's capital of Kyiv were targeted by shelling early today, according to the administration in Kyiv cited by Sky News Arabia. Furthermore, Ukrainian President Zelensky's office later said that a critical infrastructure facility was hit by drone strikes in the Kyiv region, according to Reuters.
• Ukraine President Zelenskiy said cannot have diplomacy with Russia today and cannot respect leaders who are killing and not respecting international law.

OTHER

• Saudi Arabia fully rejected statements criticising the kingdom after the OPEC+ output cut decision, while it said that statements critical of the kingdom are not based on facts and set the OPEC+ decision outside its economic context.
• US officials are concerned the Russian oil price cap will fail as a result of the OPEC+ cut, according to Bloomberg.
• North Korean leader Kim guided a test firing of long-range strategic cruise missiles which hit a target 2,000km away and are capable of carrying nuclear weapons, while North Korean leader Kim said focus should be on developing nuclear forces, according to Yonhap and KCNA.
• North Korea reportedly cancelled a meeting with the EU diplomatic service, while the reason was unclear but followed two recent statements from Brussels that may have impacted DPRK decision-making, according to NK News citing sources.
• Japan's Defence Minister said North Korea has likely achieved the capability of mounting a nuclear warhead on a ballistic missile that could reach Japan, according to Reuters.
• US FCC is set to ban all US sales of new Huawei and ZTE equipment as well as some sales of video surveillance equipment from three other Chinese firms amid national security concerns, according to Axios citing sources.

APAC TRADE

EQUITIES

• APAC stocks traded cautiously following the soft handover from Wall Street where markets ended the session marginally lower after hot PPI data and mixed FOMC Minutes which spurred a short-lived dovish reaction.
• ASX 200 was kept afloat by outperformance in its top-weighted financials sector and as earnings optimism provided a tailwind with Qantas shares flying high on expectations for a return to profit for the current 6-month period.
• Nikkei 225 was lacklustre following recent currency weakness and firm PPI data which climbed to a 5-month high.
• KOSPI underperformed after North Korean leader Kim guided a test firing of long-range strategic cruise missiles which hit a target 2,000km away and are capable of carrying nuclear weapons.
• Hang Seng and Shanghai Comp. were both subdued as China continued to advocate the strict zero-COVID approach with a Foreign Ministry spokesperson noting that China needs COVID security to achieve economic growth, although downside in the mainland was contained amid support for the property industry with China local governments to purchase houses as stimulus to help developers.

NOTABLE APAC HEADLINES

• China Semiconductor Industry Association said it opposes the US Commerce Department's export control regulations and hopes the US government can correct wrong practices in a timely manner, while it was separately reported that TSMC (2330 TT) received a 1-year US licence for China chip expansion.
• TSMC (2330 TT/TSM) Q3 2022 (TWD): Net profit 280.9bln (exp. 265.64bln), Gross margin 60.4% (exp. 58.9%), and said the Co. faces challenges from rising inflationary costs in 2023; 2022 Capex seen around USD 36bln (vs prev. guidance of USD 40-44bln); sees Q4 business around flat; not considering share buyback
• Samsung (005930 KS) has been granted a 1yr exemption from new US restrictions that block exports of advanced chips and related equipment to China, according to WSJ sources.
• Chinese Health Official said China will continue to strengthen COVID prevention and control, will resolutely guard against large-scale outbreaks, Reuters.
• Chinese local governments are to purchase houses as stimulus to support developers, according to China Securities Times.
• Japanese Finance Minister Suzuki said excess FX volatility and disorderly moves can hurt the economy and financial stability, while he told the G20 that Japan is deeply worried about recent sharp FX volatility and explained that recent intervention was prompted by excess moves by speculators. Furthermore, Suzuki said they cannot tolerate excess FX moves by speculators and will take decisive action on speculative FX moves in which they are focused on FX volatility rather than the yen level regarding intervention, according to Reuters.
• PBoC set USD/CNY mid-point at 7.1101 vs exp. 7.1248 (prev. 7.1103)

DATA RECAP

• Japanese Corp Goods Price MM (Sep) 0.7% vs. Exp. 0.2% (Prev. 0.2%, Rev. 0.4%)
• Japanese Corp Goods Price YY (Sep) 9.7% vs. Exp. 8.8% (Prev. 9.0%, Rev. 9.4%)